by Louis Navellier

January 12, 2021

Mar-a-Lago Palm Beach Resort Image

The political blame game will be endless and long lasting in the wake of the capitol siege. I suspect that after Joe Biden is sworn in as President, Donald Trump will subsequently re-emerge via Trump TV on Newsmax or another channel. The good news is that the stock market was not adversely impacted from the capitol siege. All the stock market wants is for this uncertainty to end, and that happened last week.

Late Wednesday night, the Senate reconvened and officially certified the electoral college vote. Vice President Mike Pence did his constitutional duty and oversaw the electoral college count. There have been multiple resignations of cabinet officers and White House and Capitol officials in the wake of the siege. An increasingly isolated President Trump finally committed to “an orderly transition” of power after Congress certified that Joe Biden won the Electoral College vote, so the end result is still less uncertainty.

In the midst of all this madness, I saw President Trump last week when my family had dinner at Mar-a-Lago. We were having drinks in the Library before dinner and President Trump was kind enough to come in and say hello. We had dinner two tables away from the President and the First Lady that night. Next to us was Judge Jeanine Pirro, Michael Lindell (the “My Pillow” guy), and Congressman Matt Gaetz (R-Fla). Donald Trump, Jr. and Kimberly Guilfoyle were also nearby, as was Tiffany Trump.

It is usually a bit of “Who’s Who?” at Mar-a-Lago but President Trump has always gone out of his way to be a gracious host. The highlight of the night was Matt Gaetz proposing to his fiancé, who said “yes” and then she relived the moment with Tiffany Trump. My youngest daughter and my son were quite shocked and surprised by how gracious President Trump was to his guests, and we enjoyed dining at Mar-a-Lago.

Outside the Beltway Drama, The Economy Hums Along

The economic news last week was mixed. Let’s start with the good news. The Institute of Supply Management (ISM) on Tuesday announced that the December ISM manufacturing index rose to 60.7, up from 57.5 in November. The new orders component was especially encouraging, rising to 67.9 in December, up from 65.1 in November. Also impressive was the production component, rising to 64.8 in December, up from 60.8 in November. A friend of mine who is a big automotive supplier recently mentioned that steel orders for the first quarter are up 21%. Due to strong automotive and construction demand, manufacturing clearly remains healthy. In fact, 16 of the 18 industries ISM surveyed improved.

The Commerce Department on Wednesday announced that factory orders rose 1% in November, the seventh straight monthly increase. Economists were expecting factory orders to rise just 0.8%, so this was a pleasant surprise. This is further proof that there is a manufacturing recovery underway.

The biggest news last week came in the employment sector. First, ADP reported on Wednesday that 123,000 private payrolls were lost in December, due largely to 105,000 service jobs being shed due largely to Covid-19 restrictions. This came as a big surprise, since economists were expecting 60,000 private payroll jobs to be created in December. Interestingly, medium sized businesses (50 to 499 employees) created 37,000 jobs in December, while small and large business shed jobs. This was the first decline in private sector jobs since last April, at the height of the first coronavirus lockdown.

Then, on Thursday, the Labor Department reported that weekly unemployment claims were 787,000, virtually the same as the revised 790,000 in the previous week. Continuing unemployment claims declined to 5.072 million compared to a revised 5.198 million in the previous week. Both weekly and continuing unemployment claims came in better than economists’ consensus estimate of 800,000 and 5.2 million, respectively. Overall, unemployment claims remain elevated due to the Covid-19 restrictions.

Then on Friday, the Labor Department announced that 140,000 payroll jobs were lost in December and that the unemployment rate remained at 6.7%. This was the first decline in payroll jobs in 8 months and a big surprise, since economists were expecting an increase in payroll jobs. Average hourly earnings increased by 0.8% or 23 cents to $29.81 in December and have risen a robust 5.1% in the past year, which is good news. The best news was that the October and November payrolls were revised up by 44,000 and 91,000 to 654,000 and 336,000, respectively – and December payrolls may be revised up later, as well.

Some of the lost jobs were the 45,000 government jobs lost in December, including many on the state and local level, so perhaps government budgets are now under increasing pressure from lost tax revenue due to the Covid-19 pandemic. In particular, 32,000 education jobs were lost, plus another 20,000 state and local jobs, while the federal government added 6,000 jobs in December. I should add that private education lost 63,000 jobs in December and has lost an amazing 450,000 jobs since February!

In other economic news, the Commerce Department reported on Thursday that the trade deficit soared 8% in November to $68.14 billion, which is the highest level in 14 years. The good news is that trade volume is rising. Imports increased 2.9% to $252.3 billion, while exports rose 1.8% to $184.2 billion. In November, imported consumer goods hit an all-time high as retailers added inventory for the holiday shopping season. In the third quarter, the trade deficit reduced overall U.S. GDP growth by 3.2%, and it appears that the fourth-quarter trade deficit’s negative impact on GDP is expected to be even larger.

Speaking of GDP, the Atlanta Fed lowered its fourth-quarter GDP estimate to an 8.6% annual pace, down from its previous estimate of a 10.4% annual pace. Lackluster retail sales, Covid-19 restrictions, and a growing trade deficit were largely responsible for this downward revision. Nonetheless, 8.6% GDP growth is still very positive and should continue in 2021 if Covid-19 restrictions are eventually lifted.

The Latest News on the Dollar, Treasury Bonds, and China Stocks

Yields on the 10-year Treasury bond rose from 0.935% to 1.12% last week, due largely to the perception that the Biden Administration would enact another stimulus package and substantially increase the U.S. federal budget deficit. As the 10-year Treasury bond yield rose last week, the U.S. dollar firmed up a bit, but the WSJ Dollar Index has declined 5.7% in the past 12 months as both the U.S. trade and budget deficits have soared!  The globalists that will be dominating the Biden Administration are anticipated to be much more friendly to China, so our Chinese stocks remain incredibly strong!

On Monday, the NYSE announced that it was delisting three large telecommunication Chinese ADRs with ties to the Chinese military due to an executive order from President Trump. Then abruptly on Monday night, the NYSE abruptly reversed its decision to delist these three Chinese telecommunication companies and said it, “no longer intends to move forward with the delisting action” after discussions with “relevant regulatory authorities.” Clearly, the NYSE is trying to run out the clock in hopes that a Biden Administration will reverse President Trump’s executive order. The NYSE also said, “At this time, the (ADR) Issuers will continue to be listed and traded on the NYSE.” Then abruptly on Wednesday, the NYSE did a U-turn and said it would delist these three large telecommunication Chinese ADRs after receiving new guidance from the Treasury Department. Clearly, President Trump is still in charge!

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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Louis Navellier
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Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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